Bright Present

Vremya Novostei
№70, April 23, 2009
Vera SITNINA, Vera KUZNETSOVA

They promise to put small business on an equal footing with big one in terms of taxes

The All-Russian Forum on Small and Medium-Sized Enterprises organized by Vnesheconombank, the Economic Development Ministry and the Non-government Organization OPORA RUSSIA became a real festival of small business. And It started with congratulations to OPORA's irreplaceable President Sergei Borisov who was decorated by a presidential decree by the Order of Friendship.

The Forum was attended by Prime Minister Vladimir Putin, his First Deputy Igor Shuvalov, Economic Development Minister Elvira Nabiullina, Presidential Aide Arkady Dvorkovich and Moscow’s Mayor Yury Luzhkov. At a time of coping with the global economic crisis, great hopes are pinned on small enterprises in keeping the economy afloat and combating unemployment.

Mr. Dvorkovich expressed a common spirit. “Small business has always to come up against problems, all the more so, in times of crisis. But as opposed to big business it is in the habit of overcoming difficulties” he said. “The times when small business was an optional supplement to the economy should come to an end and this should happen now”, said Sergei Borisov. Mrs. Nabiullina agreed with him saying that providing support for small business is the highest priority. “We are ready to amend legislation if necessary”, she said.

According to Mr. Dvorkovich, work should be performed along four lines – we must ensure that direct action regulations dominate legislation. “The number of regulations leaving decisions to the discretion of bureaucrats is still very great”, believes the Kremlin official. The second line deals with giving signals. Arkady Dvorkovich reminded the President’s very successful slogan – “do not give small business nightmares”. The slogan was at fist welcomed but then they somehow forgot it, but if necessary the President can remind it again”, he assured the audience. The third measure is to create incentives. The President ordered to envisage a transitional period upon moving to insurance compensations for enterprises employing special taxation regulations. “We expect the government to do it “, he said to the members of the cabinet in attendance of the Forum. And the fourth measure is to exercise control. We can enact a lot of laws and give a lot signals but if bureaucrats continue to work in the permissive environment nothing is going to change.

The presidential aide said that Dmitry Medvedev ordered to conduct an inspection of executive authorities of all levels that perform regulatory and supervisory functions and their potential corrupt links with organizations providing services in certain spheres including services on preparing and examining documents. And Moscow’s Mayor Yury Luzhkov said that in 2009 any inspections of small enterprises would be banned.

But it was Prime Minister Vladimir Putin who gave the biggest presents to the Forum’s participants and the entire small business. His first proposal to increase the threshold of employing the simplified taxation system from 30 million to 60 million of yearly turnover drew loud applause.

Today only companies whose yearly turnover is not in excess of 30 million ruble are allowed to move to a simplified taxation system. According to the Finance Ministry’s estimate, budgetary losses would amount to about 100 billion rubles. Moreover there is a threat of business fragmentation. But the government ventured to take this measure. “Now we have Easter days. And it’s all in the timing” smiled Mr. Putin.

Another novation that won loud and long applause is associated with the cancellation of mandatory use of cash registers by small enterprises that pay uniform imputed tax. A relevant law is to be prepared by July 1, 2009. “Since in our country a cash register sometimes costs more than a product on sale”, explained the Premier. According to him, small and medium-sized businessmen use about 2 million cash registers worth 30 billion rubles and spend another 10 billion rubles on their maintenance. Mr. Putin said that we could use simpler equipment or write a cheque by hand. But he warned businessmen that rights of consumers should be fully observed. If the buyer asks for a cheque it should be given to him”. The Prime Minister said that funds committed to enterprises under regional and municipal small and medium-sized enterprises development programs are not to be liable to profit tax. In order to offer easier access to state and municipal orders, requirements for securing applications for small enterprises’ participation in tenders and auctions will be reduced from 5% to 2%. “By experts’ estimates, this measure would allow small enterprises to save 24 billion rubles”, added the Premier.

Besides tax reliefs small enterprises would obtain additional financing. The government would commit 15 billion rubles to regional guarantee funds on top of 3.5 billion rubles already committed. Each of 15 thousand brave businessmen who decided to start a business this year would receive 300 thousand rubles.

“We’ll be tying more firmly credit resources made available to banks by the state to their participation in financing the real economy including small enterprises” said the Premier. “Upon extending subordinated credits we won’t only pay attention to how banks cooperate with the real economy but formulate in advance terms and conditions of extending loans”, said he.

Small and medium-sized enterprises would receive about 100 billion rubles in state aid in 2009. This was a pledge made by Vnesheconombank Chairman Vladimir Dmitriev at the Forum. He reminded that 30 billion rubles would be committed from the federal budget. According to him, the European Bank for Reconstruction and Development and Deutsche Bank are ready to commit about 1 billion euros against VEB’s guarantees through regional banks to provide financial aid to small and medium-sized enterprises. Germany’s KfW is going to commit about 200 million euros to support small enterprises. Sberbank Head German Gref promised that each refusal to extend a credit to a small enterprise by any of 20 thousand Sberbank’s departments would be considered individually. But he also reminded of borrowers’ responsibility. According to him, the growth in bad loans was 30% in the last two months. These aid programs are not gratuitous. “We should make small enterprises more responsible for repaying bank credits”, said Mr. Gref.

Against the backdrop of these important statements, Vladimir Putin’s words that in three years’ time the government would get back to reviewing tax burden on small enterprises were unnoticed. All the more so, throughout the Forum its participants kept on saying that this tax burden is too high as it is. As Mrs. Nabiullina told us that 44% of small businessmen denounced taxes as a heavy burden while only 22% of big businessmen shared this opinion.

It was Vice Premier Igor Shuvalov who made things clear at the very end of the Forum when its participants and journalists were not listening to speakers very attentively. “In three years’ time we must move to supporting small enterprises through subsidizing interest rates and extending grants. We have to work out a mechanism which will prevent us from incurring large fiscal obligations as well as adopt universal rules applied to all”, said he. He says that this is standard world practice.

So, small enterprises should be aware that in three years’ time they will be taxed as much as industry giants. According to Mr. Shuvalov, the Russian tax system is not going to be unchanged for many years to come but is still in the making. Absolutely all companies and not only small enterprises should be ready for increased tax burden. Igor Shuvalov reminded that when a decision to reduce the uniform social tax was made, the state hoped that a more transparent taxation system would be put in place and that most businessmen would not evade paying taxes. “But this did not happen. We’ll have to discuss these problems in the coming years too”, he warned.